Financial Modelling in Microsoft Excel/Overview

Financial models need to be:

• useful – they need to assist the user in solving the business problem
  • This needs good business analysis and design skills
• accurate – they must do exactly what they say they do
  • This needs correct logic, accurate calculations & relevant results
• flexible, so they can evolve throughout the analytical process and beyond
• provable – the inputs, calculations and results can all be verified

This needs clear layout, good documentation, data validation & results testing.

A good guiding rule is to keep things as simple and as clear as possible, for example:

• using common functions rather than complex or rarely used functions
• keeping formulae short
• not being "clever", which may just confuse other people
• separating the spreadsheet into clearly marked sections

Code Complete, the classic book on programming by Steve McConnell, says that managing complexity is the major imperative.